Intermediate Accounting II Chapter 15: Accounting for Stockholders' Equity

Preferred Stock

An equity security that has two common preferences over common stock.

Cash Dividends

Distribution from earnings paid in the form of cash

Stock Dividends

Distributions in the form of the firm's own equity shares.

Preferred Shareholders

Investors holding shares in a company that have preferential rights over common shares.

Fixed-Dividend Preferred Shares

Preferred shares whose dividend is fixed and payment is required.

Participating Preferred Stock

Preferred stock that shares with common stockholders any dividends paid in excess of the percent stated on preferred stock.

Par Value Method

Records the acquisition at the par value of the repurchased shares.

Cost Method

Records the acquisition of treasury shares at the cost of the repurchased shares.

Treasury Shares

The corporation's own shares that it repurchased and holds for some future use (for example, to be distributed to satisfy the terms of an employee stock option plan).

Market Value

The number of common shares outstanding multiplied by the price per share at which the stock is currently trading.

Common Shareholders

The residual claimants of the firm who receive dividend distributions after the company has paid all other providers of capital their return on investment.

Retroactive Adjustment

Treating stock splits or dividends as though they occurred in the beginning of the year

GHI Inc. currently has 10,000 shares of 8%, $50 par value preferred stock outstanding (100,000 shares authorized). How much is the annual dividend for preferred stock?

$40,000, The annual preferred dividend is calculated as the dividend percentage x par value x number of shares issued. This results in an annual dividend of $40,000, calculated as .08 x $50 par x 10,000 shares issued.

Goo Inc. had the following share information related to its Common Stock: Shares Authorized 250,000 Shares Issued 100,000 Treasury Shares 7,500 How many shares of Common Stock are outstanding?

92,500, Outstanding shares are defined as those shares that are actually in the hands of shareholders. To calculate outstanding shares, subtract the treasury shares from those shares that are issued, as treasury stock is considered issued, but it is not in the hands of shareholders. This results in outstanding shares of 92,500, calculated as 100,000 shares issued - 7,500 treasury shares.

P/E Ratio

Expresses the relationship between the company's market value and its net income as shown in the following equation. Price to Earnings Ratio (P/E) = Market Value of Common Stock Net Income

Unissued Shares

Shares authorized but not issued

Prior Period Adjustment

The correction of an error in previously issued financial statements.

Payment Date

The date that the firm actually distributes the dividend.

Which of the following is an advantage of preferred stock over common stock?

These are both advantages preferred stock has over common stock. Preferred stock is an equity security that has two common preferences over common stock. Specifically, preferred stock has priority over common shares in terms of receiving dividends and the right to claim assets in the event of liquidation.

Accumulated Other Comprehensive Income

This account includes the cumulative amount of all previous items reported as other comprehensive income.

Backdoor Inc. had 200,000 shares of $5 par common stock outstanding. The company declared a stock dividend of 100,000 shares when the market price was $25. By how much did additional paid-in capital increase when the dividend was distributed to the shareholders?

$0, This stock dividend is an example of a large stock dividend, as 100,000 shares is 50% of the 200,000 shares outstanding. A large stock dividend (>20‒25% of outstanding stock) is recorded at the par value of the stock because it is assumed that the size of the dividend will affect the market price of the stock. The journal entries to record the declaration of the dividend and the subsequent distribution are: Accounts Dividends (100,000 x $5 par) 500,000 Common Stock Dividends Distributable Common Stock Dividends Distributable Common Stock 500,000 500,000 500,000 Again, there is no additional paid-in capital in either entry.

Frontdoor Inc. had 300,000 shares of $1 par common stock outstanding. The company declared a stock dividend of 30,000 shares when the market price was $12. By how much did additional paid-in capital increase when the dividend was declared?

$330,000, This stock dividend is an example of a small stock dividend as 30,000 shares is 10% of the 300,000 shares outstanding. A small stock dividend (< 20-25% of outstanding stock) is recorded at the fair value of the stock on the date of declaration, as follows: Accounts January 1 Dividends (30,000 x $12) 360,000 Common Stock Dividends Distributable (30,000 x $1 par) 30,000 Additional Paid-in Capital in Excess of Par—Common (30,000 x ($12 - $1)) 330,000

Stock Split

A proportionate increase in the number of equity shares and a proportionate decrease in the share's par value per share if the shares have a par value.

Par Value

A value assigned to a share of stock and printed on the stock certificate

Property DIvidends

Distributions of any asset other than cash

ANW Inc. had 25,000 shares of $2 par Common Stock outstanding when it declared and distributed a 2-for-1 stock split when the shares were trading at $200 per share. What journal entry is needed to record this stock split?

There is no entry required for this transaction. A memo entry may be recorded. When a corporation declares and issues a stock split, no formal journal entry is required, as all account balance remain unchanged. A stock split simply changes the makeup of the Common Stock account (number of shares and par value) but does not change the account balance. A memo entry, or explanation, may be prepared related to a stock split.

Frontdoor Inc. had 300,000 shares of $1 par common stock outstanding. The company declared a stock dividend of 150,000 shares when the market price was $20. By how much did additional paid-in capital increase when the dividend was distributed to the shareholders?

$0, This stock dividend is an example of a large stock dividend, as 150,000 shares is 50% of the 300,000 shares outstanding. A large stock dividend (>20‒25% of outstanding stock) is recorded at the par value of the stock because it is assumed that the size of the dividend will affect the market price of the stock. The journal entries to record the declaration of the dividend and the subsequent distribution are: Accounts Dividends (150,000 x $1) 150,000 Common Stock Dividends Distributable Common Stock Dividends Distributable Common Stock 150,000 150,000 150,000 Again, there is no additional paid-in capital in either entry.

On January 1, Year 1, Black Dog Corp. began operations and issued 30,000 shares of $5 par common stock for $9 per share. On June 30, the company bought back 10,000 shares for $8 per share. Then, on September 15, the company resold 5,000 shares for $12 per share. What amount of total additional paid-in capital should Black Dog report on its December 31, Year 1 balance sheet if Black Dog uses the cost method to account for its treasury stock?

$140,000, Under the cost method, Black Dog would record the following journal entries for its Year 1 stock transactions: January 1, Year 1 - Issue 30,000 shares of $5 par common stock for $9 per share: Accounts January 1 Cash (30,000 x $9) 270,000 Common Stock (30,000 x $5) 150,000 Additional Paid-in Capital in Excess of Par--Common 120,000 June 30 - Repurchase 10,000 shares for $8 per share: Accounts June 30 Treasury Stock (10,000 x $8) 80,000 Cash 80,000 September 15, Year 1 - Resell 5,000 shares for $12 per share: Accounts September 15 Cash (5,000 x $12) 60,000 Treasury Stock (5,000 x $8) 40,000 Additional Paid-in Capital from Treasury Stock Transactions 20,000 Therefore, total APIC on Black Dog's balance sheet at December 31, Year 1, would be $140,000 ($120,000 from original sale + $20,000 from sale of treasury stock).

JKL Inc. currently has 15,000 shares of 10%, $100 par value preferred stock outstanding (200,000 shares authorized). How much is the annual dividend for preferred stock?

$150,000, The annual preferred dividend is calculated as the dividend percentage x par value x number of shares issued. This results in an annual dividend of $150,000, calculated as .10 x $100 par x 15,000 shares issued.

CNI Inc. has 5,000 shares of $100 par, 5% preferred stock issued. CNI has declared and paid cash dividends of $10,000 and $20,000 the last two years. What is the amount of dividends in arrears after Year 2 assuming the Preferred Stock is cumulative, no change in shares for Preferred Stock, and no dividends in arrears prior to Year 1?

$20,000, To calculate dividends in arrears, first you must calculate the annual dividend for Preferred Stock, determined as: .05 x $100 Par x 5,000 shares = $25,000 annual preferred dividend. Preferred shareholders were supposed to receive dividends totaling $50,000 for Year 1 and Year 2 combined ($25,000 per year x 2 years). They only received $30,000 ($10,000 for Year 1 + $20,000 for Year 2), however, resulting in dividends in arrears of $20,000 ($50,000 - $30,000).

DGR Inc. has 10,000 shares of $50 par, 8% preferred stock issued. DGR has declared and paid cash dividends of $20,000 and $30,000 the last two years. What is the amount of dividends in arrears after Year 2 assuming the Preferred Stock is cumulative, no change in shares for Preferred Stock, and no dividends in arrears prior to Year 1?

$30,000, To calculate dividends in arrears, first you must calculate the annual dividend for Preferred Stock, determined as: .08 x $50 Par x 10,000 shares = $40,000 annual preferred dividend Preferred shareholders were supposed to receive dividends totaling $80,000 for Year 1 and Year 2 combined ($40,000 per year x 2 years). They only received $50,000 however ($20,000 for Year 1 + $30,000 for Year 2), resulting in dividends in arrears of $30,000 ($80,000 - $50,000).

Classic Cars Corp. has 50,000 shares of $10 par common stock and 20,000 shares of $15 par fully participating 10% cumulative preferred stock. If the company declares cash dividends of $100,000 during the current year and there are no dividends in arrears, what will be the total dividend payment to preferred shareholders?

$37,500, When a company has fully participating preferred stock, excess dividends are divided between the common and preferred shareholders on a pro-rata basis. The excess dividends are those remaining after both preferred and common shareholders receive dividend payments based on the preferred dividend percentage, as follows: Total dividend $100,000 Less: Preferred dividends [(20,000 × $15) × 10%] (30,000) Less: Common dividends [(50,000 × $10) × 10%] (50,000) Excess dividends $ 20,000 These excess dividends are split proportionally based on the total par value of the issued. The total par vale of preferred stock is $300,000 (20,000 x $15). The total par value of common stock is $500,000 (50,000 x $10). This results in total par value of all issued stock of $800,000 ($300,000 preferred + $500,000 common). The proportion of the excess dividends is then calculated as: Preferred stock share of excess dividends: 300,000 x $20,000 = $7,500 800,000 Common stock share of excess dividends: 500,000 x $20,000 = $12,500 800,000 Therefore, the total dividend paid to preferred shareholders is $37,500 ($30,000 + $7,500) and to common shareholders is $62,500 ($50,000 + $12,500).

Boone Corporation's outstanding capital stock on December 15 consisted of the following: 30,000 shares of 5% cumulative preferred stock, par value $10 per share, fully participating as to dividends. No dividends were in arrears. 200,000 shares of common stock, par value $1 per share. On December 15, Boone declared dividends of $100,000. What was the amount of dividends payable to Boone's preferred stockholders?

$60,000, There are both common and preferred shareholders. The dividends are $100,000 and have to be split among the common and preferred shareholders. The preferred shareholders receive their dividends first at 5% of par value, or $15,000 (5% × 30,000 × $10). Because the preferred stock is "fully participating," the common shares are initially treated the same way as the preferred. The common stock thus gets its 5% of par value, or $10,000 (5% × $200,000 × $1). The remaining dividend amount of $75,000 ($100,000 - ($15,000 + $10,000)) is divided proportionally in relation to relative par values as follows: Total par value common $200,000 (200,000 shares × $1) Total par value preferred 300,000 (30,000 shares × $10) Total par value Common proportion Preferred proportion Total $500,000 40% 60% 100% ($200,000 / $500,000) ($300,000 / $500,000) Preferred shareholders will receive 60% of the remaining dividend, or $45,000 ($75,000 x 60%). Common shareholders will receive 40% of the remaining divided, or $30,000 ($75,000 x 40%). The total dividend to preferred shareholders is then $60,000 ($15,000 + $45,000) and to common shareholders, $40,000 ($10,000 + $30,000).

Backdoor Inc. had 200,000 shares of $5 par common stock outstanding. The company declared a stock dividend of 30,000 shares when the market price was $25. By how much did additional paid-in capital increase when the dividend was declared?

$600,000, This stock dividend is an example of a small stock dividend as 30,000 shares is 15% of the 200,000 shares outstanding. A small stock dividend (< 20-25% of outstanding stock) is recorded at the fair value of the stock on the date of declaration, as follows: Accounts January 1 Dividends 750,000 Common Stock Dividends Distributable (30,000 x $5 par) 150,000 Additional Paid-in Capital in Excess of Par—Common (30,000 x ($25 - $20)) 600,000

TBD Corporation issued 10,000 shares of $2 par Common Stock in exchange for Land with a fair value of $115,000. What is the appropriate journal entry to record this transaction?

Accounts Land 115,000 Common Stock 20,000 Additional Paid-in Capital in Excess of Par-Common 95,000 The journal entry needed for this transaction debits Land for the fair value of the Land, then credits Common Stock for the par value of the stock issued and credits Additional Paid-in Capital for the amount received in excess of the par value.

CBT Corporation issued 1,000 shares of $1 par Common Stock in exchange for Land with a fair value of $85,000. What is the appropriate journal entry to record this transaction?

Accounts Land 85,000 Common Stock 1,000 Additional Paid-in Capital in Excess of Par - Common 84,000, The journal entry needed for this transaction debits Land for the fair value of the Land, then credits Common Stock for the par value of the stock issued and credits Additional Paid-in Capital for the amount received in excess of the par value.

Which of the following items must be disclosed related to convertible equity securities?

All of this information must be disclosed related to convertible equity securities. The company must provide adequate disclosure regarding the significant terms of the conversion features of a contingently convertible security. This information enables financial statement users to understand the circumstances of the contingency and the potential impact of conversion. The disclosures include all of the following: Events or changes in circumstances that would cause the contingency to be met. Any significant features necessary to understand the conversion rights and the timing of those rights (e.g., the periods in which the contingency might be met and the securities that may be converted if the contingency is met). The conversion price and the number of shares into which a security is potentially convertible. Events or changes in circumstances, if any, that could adjust or change the contingency, conversion price, or number of shares, including significant terms of those changes. The manner of settlement upon conversion and any alternative settlement methods (e.g., cash, shares, or a combination).

Liquidating Dividends

Any distribution that the firm pays from contributed capital instead of retained earnings.

Porpoise Company issues 7,000 shares of $60 par preferred stock for $450,000. It is not required to buy back the preferred stock. However, the preferred stock includes a redemp-tion feature that gives the holder the option to redeem the shares for cash at specified dates. Should Porpoise classify this preferred stock as a liability or equity?

Because the preferred shares give the holder the option to redeem, they are not mandatorily redeemable. Therefore, Porpoise classifies the preferred stock as equity.

On September 1, Year 1, Royal Corp., a newly formed company, had the following stock issued and outstanding: Common stock, no par, $1 stated value, 5,000 shares originally issued for $15 per share. Preferred stock, $10 par value, 1,500 shares originally issued for $25 per share. Royal's September 1, Year 1, statement of stockholders' equity should report:

Common Stock - $ 5,000; Preferred Stock - $15,000; Additional Paid-in Capital - $92,500, Preferred stock, common stock, and additional paid-in capital account balance are determined as: Common stock (5,000 shares × $1 stated value) $ 5,000 Preferred stock (1,500 shares × $10 par value) $15,000 Additional paid-in capital from: Common stock ($15 ‒ $1) × 5,000 shares = $70,000 Preferred stock ($25 ‒ $10) × 1,500 shares = $22,500 $92,500 $5,000 Common Stock; $15,000 Preferred Stock; $92,500 APIC.

On October 1, Year 1, Novelty Corp., a newly formed company, had the following stock issued and outstanding: Common stock, no par, $1 par value, 10,000 shares originally issued for $10 per share. Preferred stock, $5 par value, 1,000 shares originally issued for $10 per share. Novelty's October 1, Year 1, statement of stockholders' equity should report:

Common Stock - $10,000; Preferred Stock - $5,000; Additional Paid-in Capital - $95,000, Preferred stock, common stock, and additional paid-in capital account balance are determined as: Common stock (10,000 shares × $1 par value) $10,000 Preferred stock (1,000 shares × $5 par value) $5,000 Additional paid-in capital from: Common stock ($10 ‒ $1) × 10,000 shares = $90,000 Preferred stock ($10 ‒ $5) × 1,000 shares = $ 5,000 $95,000 $10,000 Common Stock; $5,000 Preferred Stock; $95,000 APIC.

Common Stock, Preferred Stock, and Additional Paid-in Capital all fall under which component of stockholder's equity?

Contributed Capital, Contributed capital includes the amounts paid in by common and preferred shareholders. Common shareholders are the residual claimants of the firm who receive dividend distributions after the company has paid all other providers of capital their return on investment. Common shareholders can be individuals, other corporations, or institutions (such as mutual funds). Preferred shareholders are investors holding shares in a company that have preferential rights over common shares. Contributed capital includes the par value of common and preferred shares as well as additional paid-in capital in excess of par or stated value.

Which of the following represents the three major components of stockholder's equity?

Contributed Capital, Retained Earnings, and Accumulated Other Comprehensive Income, Stockholder's equity is divided into three major components. These three components are: Contributed Capital (example: Common Stock and/or Preferred Stock) Retained Earnings Other Comprehensive Income

P/B Ratio

Expresses the company's market value to its book value as shown in the following equation: Price@to@Book (P/B) Ratio= Market Value of Common Stock Book Value of Common Stockholders' Equity

Porpoise Company issues 7,000 shares of $60 par preferred stock for $450,000. Porpoise is not required to buy back the preferred stock. However, the preferred stock includes a redemption feature that gives the holder the option to redeem the shares for cash at speci-fied dates. Should Porpoise classify this preferred stock as a liability or equity under IFRS?

IFRS classifies the preferred stock as a liability because Porpoise has a contractual obligation to pay cash upon the shareholders' request. Although not mandatorily redeemable, the company is obligated by contract to pay cash at the shareholders' option.

Dividends in arrears

Preferred dividends that were supposed to be declared but were not declared during a given period

Mandatorily Redeemable Preferred Stock

Preferred shares for which redemption is certain at a specified price on a specified date.

Cumulative Preferred Shares

Preferred shares on which undeclared dividends accumulate until they are paid; common shareholders cannot receive a dividend until all cumulative dividends have been paid

Non-Mandatorily Redeemed Preferred Shares

Preferred shares that can be redeemed at the option of the shareholder, but that option may not be exercised with certainty.

Redeemable Preferred Shares

Preferred shares that give the issuer the right to purchase the shares from shareholders at specified future dates and prices.

Callable Preferred Shares

Preferred shares that the issuing corporation, at its option, may retire by paying a specified amount (the call price) to the preferred shareholders plus any dividends in arrears.

Convertible Preferred Shares

Preferred shares that the shareholder can convert into common shares at a specified ratio.

At its date of incorporation, McCarty Company issued 100,000 shares of its $10 par common stock at $11 per share. During the current year, McCarty Company acquired 30,000 shares of its common stock at $16 per share and accounted for them by the cost method. Subsequently, these shares were reissued at a price of $12 per share. There have been no other issuances or acquisitions of its own common stock. What effect does the reissuance of the stock have on Retained Earnings and Additional Paid-in Capital?

Retained Earnings - Decrease; Additional Paid-in Capital - No effect, This problem specifically refers to the reissuance of the stock. First, to record the original transaction of acquiring treasury stock under the cost method, the journal entry would be: Accounts Current Year Treasury Stock 480,000* Cash 480,000 *30,000 shares × $16 Next, the transaction for reissuing the shares that were acquired for the treasury would be recorded as follows: Accounts Current Year Cash 360,000 * Retained Earnings 120,000** Treasury Stock 480,000*** *30,000 × $12 **balancing amount ***30,000 x $16 (original cost under the cost method) This transaction results in a decrease to Retained Earnings. Why Retained Earnings and not APIC? If we had some APIC from previous Treasury Stock transactions, we would have used it up before debiting Retained Earnings. But in this case, there were no previous Treasury Stock transactions, so we don't have any Additional Paid-in Capital from Treasury Stock Transactions to use.

AMG Corporation failed to record Dividend Revenue for book and tax purposes last year, but all financial statements have been issued already. The Dividend Revenue missing totaled $15,000, and the tax rate in effect was 20%. What adjustment is needed for Retained Earnings for this mistake?

Retained Earnings must be credited for $12,000. Had AMG recorded this revenue last year, income would have been $12,000 higher than reported. This income effect consists of $15,000 in Dividend Revenue less $3,000 in Income Tax Expense ($15,000 x 20%). Because income was understated by $12,000, Retained Earnings now needs to be increased (credited) for the amount of the prior period adjustment.

MGR Corporation failed to record Interest Revenue for book and tax purposes last year, but all financial statements have been issued already. The Interest Revenue missing totaled $10,000, and the tax rate in effect was 30%. What adjustment is needed for Retained Earnings for this mistake?

Retained Earnings must be credited for $7,000. Had MGR recorded this revenue last year, income would have been $7,000 higher than reported. This income effect consists of $10,000 in Interest Revenue less $3,000 in Income Tax Expense ($10,000 x 30%). Because income was understated by $7,000, Retained Earnings now needs to be increased (credited) for the amount of the prior period adjustment.

Retgo Corporation presents the following information in the footnotes to the finan-cial statements: Authorized shares 75,000 Issued shares 58,000 Shares held in the treasury 16,000 How many shares are outstanding? How many shares are unissued?

Retgo has 42,000 shares outstanding—the 58,000 issued shares less 16,000 treasury shares. It has 17,000 shares unissued—the 75,000 authorized shares less 58,000 issued.

Under IFRS, Additional Paid-in Capital is referred to as what?

Share Premium, Under IFRS, Additional Paid-in Capital (GAAP) is referred to as Share Premium. Share Capital under IFRS is the equivalent of Common Stock, Contributed Capital, or Paid-in Capital under GAAP.

Declaration Date

The date on which the board of directors declares the dividend and the firm records a legal liability for the dividend, the company records the dividend with a debit to the dividends account and a credit to dividends payable.

Ex-Dividend Date

The date two business days before the date of record, establishing those individuals entitled to a dividend

Record Date

The date when the company determines ownership of outstanding shares for dividend purposes

Stated Value

The legal capital assigned per share to no-par stock

Issued Shares

The number of shares sold or otherwise distributed to shareholders

Outstanding Shares

The number of shares still in the hands of the stockholders and are computed as issued shares less treasury shares.

Stockholders' Equity

The sum of all residual claims against the net assets of the firm and is measured as the difference in the assets and the liabilities of the entity.

Authorized Shares

The total number of shares that the firm can legally issue.

GYZ Inc. repurchased 100 shares of $1 par Common Stock for the treasury for $10 per share. GYZ later resold 50 of these shares for $9 per share. What is the amount of the loss that GYZ will show on the income statement related to Treasury Stock?

There are no gains and losses reported for the sale of treasury stock. When Treasury Stock is reissued for less than the purchase price, the difference in the price is either removed from Additional Paid-in Capital from Treasury Stock Transactions (if a balance is available) or taken from Retained Earnings. Treasury Stock transactions impact contributed capital but have no impact on net income.

Which of the following is a type of dividend that can be declared to common stockholders?

These are all types of dividends. Dividends represent a return to shareholders on their investment in the corporation. Cash dividends, distributions that firms make to the shareholders in cash, are the most common type of dividend. However, there are other types of dividends, namely stock dividends, property dividends, and liquidating dividends. Stock dividends are distributions in the form of the firm's own equity shares. Property dividends are distributions firms make of any asset other than cash (e.g., inventory or investments in shares of other entities). Cash, stock, and property dividends are all distributed from retained earnings. Liquidating dividends are any distribution that the firm pays from contributed capital instead of retained earnings.

All of the following would be included in other comprehensive income except what?

Unrealized Holding Loss on Bonds Payable, Comprehensive income includes all changes in equity during a period from all sources except those resulting from investments by owners and distributions to owners. Comprehensive income is composed of two major components: net income and other comprehensive income. Other comprehensive income (OCI) is the portion of comprehensive income that is not included in net income. The elements of net income are revenues, expenses, gains, and losses. The primary elements of OCI are: Unrealized gains and losses from the available-for-sale portfolio of investment securities and derivatives classified as cash flow hedges. Foreign currency translation adjustments. Unrecognized pension costs and benefits. Unrealized holding gains and losses from using the fair value option for liabilities are reported as part of net income, not part of other comprehensive income.

Small Stock Dividend

Stock dividend that is 25% or less of a corporation's previously outstanding shares.

Joss Inc. had the following share information related to its Common Stock: Shares Authorized 100,000 Shares Issued 75,000 Treasury Shares 10,000 How many shares of Common Stock are outstanding?

65,000, Outstanding shares are defined as those shares that are actually in the hands of shareholders. To calculate outstanding shares, subtract the treasury shares from those shares that are issued, as treasury stock is considered issued, but it is not in the hands of shareholders. This results in outstanding shares of 65,000, calculated as 75,000 shares issued - 10,000 treasury shares.

Retained Earnings

A firm's cumulative earnings or losses that it has not distributed as dividends.

Comprehensive Income

A measure of changes in a company's equity that result from recognized transactions and all economic events of the period other than transactions with owners.

Contributed Capital

Owner contributions to a corporation

Additional paid in capital in excess of par or stated value

The amounts that common and preferred shareholders contribute in excess of the par or stated value.